Here’s how the gift tax works:
If you give someone a gift, any amount exceeding $15,000 is considered a taxable gift.
However, you also get a lifetime exemption of $11.7 million.
Thus, let’s say you give someone a gift of $215,000:
• The first $15,000 is excluded
• The next $200,000 reduces your lifetime exemption to from $11.7 to $11.5 million
Thus, you don’t pay any tax because the amount over $15,000 reduced your lifetime exclusion.
However:
• When the lifetime exclusion goes down, this decreases the exemption your estate gets when you die. Thus, gifts over $15,000 could end up causing you to get hit with estate tax, depending on the value of your estate
• If the lifetime exemption reaches zero, any gifts over $15,000 will incur gift tax
Now, if you do make a gift exceeding $15,000 you need to file Form 709 (the gift tax return) on or before April 15th of the year following the gift.
And if both you and your spouse make a gift, you each need to file a separate Form 709.
You might also be subject to gift tax at the state level depending on where you live.
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